Continuity marketing - Altman Dedicated Direct

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Continuity marketing - Altman Dedicated Direct

Publication: Catalog Success MagazineIssue Month: May 2006Topic: Benefiting from Continuity and Auto-Replenishment MarketingContinuity marketing isn’t often the domain of catalog marketers, but those who dismissthis marketing approach too quickly as “not for us”, may want to reconsider. Consider this: For theaverage catalog or multichannel marketer, over 50% of new customers never makes a secondpurchase. Even if your stats are better than average, it’s hard not to find the fact that continuitycustomers buy 3-6 times per year at least intriguing. In addition, continuities can offer a valuableservice to save your customers time and hassle (while ensuring their purchasing for the category oritem is from your brand).But while continuity marketing can be compelling from a sales standpoint, it can becomplex operationally – decisions to pursue a continuity strategy should be made with eyes wideopen to avoid mistakes and omissions that turn profits into red ink.Continuity DefinitionsFor those new to this continuity marketing, let’s take a step back and offer a definition:Continuity Marketing: any direct marketing effort where the customer’s initialorder initiates multiple future shipments.While we’re defining things, there are actually 4 types of continuity programs to consider.The specifics of your product lines will determine which is best for you.Closed End Series-- A finite series of items, often collectibles, video or music. Customers havea unique delivery schedule based on their start date.Open End Series – Shipments continue until the consumer tells you to stop; example is anannual tax software update. All customers receive the product at the same time."... of the Month Club" -- Different items shipped each month within a niche, such as redwine. Set up can be open ended until the customer cancels (usually for oneself) or a finitenumber of months (often gifts). All customers receive the same item at the same time.Auto-Replenishment – Repeat the same shipment every time. Common products areconsumables such as pet food or nutritional supplements. Customers have a unique deliveryschedule based on their start date.Should you develop a continuity program?Not every brand has a viable continuity product. You need to first evaluate whether yourproduct line contains a candidate for purchase on a continuity basis. The most common are:• Consumable products customers don't want to run out of:853 Academy Street, Rural Hall, NC 27045-9329Tel: (336) 969-9538E-Mail: SAltman@AltmanDedicatedDirect.comFax: (336) 969-0187Web: www.AltmanDedicatedDirect.com


→ Inkjet cartridges, vitamins, coffee, cosmetics/skin care, pet food, air filters,medication• Education or entertainment products broken into small chunks→ Book and video sets, collectibles, kids’ and adult craft projects• Indulgences for oneself or someone else→ Wine, flowers, gourmet food, seasonal home decorOn the fence about whether your product would make a viable continuity? Products withone of these characteristics are easier to market:→ “Needs" (versus "wants") – if you need that medication every month, automaticdelivery is a big time-saver.→ Needs don’t change frequently -- e.g. air filters, vitamins, skin care. If you continuallyuse the same thing, it’s easier to see benefit in automatic deliveries.→ Shopping for the item is not "fun" -- e.g. pet medicationIn practical terms, the most likely catalogers for an active continuity program are foodmarketers; products are clearly consumable and readily open to replenishment. But the range ofproducts and size of programs is wide; so don’t limit your thinking to food items. Take a look atyour particular “evergreen” products to see if they might be candidates for a continuity offer toincrease the frequency of purchase. If there aren’t products in your existing line that are appropriatefor continuity marketing, challenge your merchants to identify continuity products that appeal toyour customers to increase your share of your customer’s wallet.Operational ChallengesAlong with the benefits, continuity programs add operational demands.Inventory Planning and ManagementContinuities may make inventory planning more predictable by knowing today whom youwill sell to next month. But accuracy of projections can have long ranging impacts; being out ofstock on auto-replenishment can have disastrous consequence, as missed shipments cannot be“made up”. From a service standpoint, Gordon Magee, Internet Marketing and Analysis Manager atDoctors Foster & Smith notes, backordering is “not acceptable”. When the auto-replenishment itemis as critical as pet food with their Catered Pet program, the need for the product cannot be deferreduntil it comes in stock.Mr. Magee adds that the load on the shipping department can be a challenge when a largevolume of auto-replenishment orders must go out. You need to schedule functions clearly to serveboth continuity orders and individual phone and web orders.853 Academy Street, Rural Hall, NC 27045-9329Tel: (336) 969-9538E-Mail: SAltman@AltmanDedicatedDirect.comFax: (336) 969-0187Web: www.AltmanDedicatedDirect.com


consumers control over as much as possible. Allow them to delay shipment dates when they aregoing to be out of town, adjust the items they receive each month, etc. By putting control incustomer hands you ensure that they get what they want, when they want it – who wouldn’t stay in acontinuity program that delivered what you want, at the moment you need it?Communication and Customer ServiceStep #1 should be a welcome letter in the first shipment detailing how the program works.This will go a long way towards ensuring customers understand what to expect.Consider providing customers access to their accounts on line as opposed to having to callin to make changes to their account. Not only does this save you $$ in service calls, it adds to thatfeeling of control for the customer. Like Green Mountain Coffee, you may want to consider aspecial customer service line for continuity customers.Reducing Cancels and Retaining Continuity CustomersSomeone calling to cancel likely still values the continuity, but something about yourprogram isn’t working for them. Give them more control so staying in your program makes sense.Control can mean allowing customization of the items in their shipment, postponing or cancelingspecific shipments (for moves or vacations), or altering the frequency of shipments if they arrive tooquickly.The best tip for retaining continuity customers is to really listen to what the customer issaying. Flexibility is key – when you are rigid with a continuity customer you will have more cancelsand fewer program members.The ability to customize shipments in the future can also impact your ability to make theinitial continuity sale. When customers have the option to change, cancel, or customize theirshipments at any time many of their doubts about the program will fade away.Program AnalysisLifetime value should be your primary measuring stick for success. If you cannotaccurately measure customer lifetime value, use the number of shipments sent to a customer as yourclosest proxy for that data. Most continuity programs will look for at least 3 additional shipmentsbeyond the initial order. Whether your goal is 3, 4, 5 or more additional shipments, the key ismonitoring and analyzing results on an ongoing basis.Tips for CatalogersGordon Magee recommends other catalogers be sure and look at all the details beforemoving forward. Every program and brand has its own special concerns; Drs. Foster and Smith hadto concern themselves with heavy product and the cost of shipping. They also looked carefully atstaffing to ensure they could service all customers.853 Academy Street, Rural Hall, NC 27045-9329Tel: (336) 969-9538E-Mail: SAltman@AltmanDedicatedDirect.comFax: (336) 969-0187Web: www.AltmanDedicatedDirect.com


Ken Crites recommends interviewing your customers to find out what they want. “Thereare reasons your best customers keep buying from you. Accentuate those reasons with yourcontinuity program.”ConclusionsDon’t be afraid of or dismiss continuity marketing, but don’t go blindly into it either.Evaluate the operational aspects in advance and be sure you can handle both the continuity and yourongoing one-at-a-time orders in the fulfillment and shipping process. Make sure your IT system isup to the challenge and if not, make the necessary changes or additions. Think about and plancustomer retention BEFORE you announce your program to your customers and prospects. Thenforge ahead – greater lifetime value and share of customer await you.Shari Altman is President of Altman Dedicated Direct, a direct marketing consultancy specializing inacquisition and loyalty marketing support for catalogers, infomercial, and continuity marketers since 1999.Prior to launching Altman Dedicated Direct, Shari spent 20 years as director of marketing for majorcatalogers and direct response marketers. Ms. Altman can be reached at 336-969-9538,SAltman@AltmanDedicatedDirect.com or by visiting www.AltmanDedicatedDirect.com.853 Academy Street, Rural Hall, NC 27045-9329Tel: (336) 969-9538E-Mail: SAltman@AltmanDedicatedDirect.comFax: (336) 969-0187Web: www.AltmanDedicatedDirect.com

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